Crypto-assets could pose even more regulatory riddles

Crypto exchanges are not the only ones waiting for new cryptocurrency legislation. Wealth-tech startups and broking firms are also tracking the moment, buoyed up by reports that the government may classify cryptos as a class of tradable assets and ask Sebi to regulate the sector.

While the bill is set to ban digital currencies as legal tender, it may allow people to buy, sell and hold the so-called crypto-assets under stringent rules. 

This could open up a new, legal playing field. Payments major Paytm and online brokerage platform Zerodha have already indicated an interest in the potential business opportunity.

Investment platforms Groww and Upstox are also likely to join the action. The two startups’ valuations have soared as investors bet on the possibility that they will become India’s Robinhood, the US app that made stock trading easy and cheap for a new generation of investors and is now logging significant crypto-linked revenues.

Wealth-tech entrepreneurs told The CapTable they were studying models of US payment firms Venmo and Cash App and UK fintech Revolut, which allow users to buy and sell select cryptocurrencies, and might adopt a similar strategy.

One founder said if he didn’t offer crypto trading, his users would shift to another platform, a sign of the craze in digital currencies. At the same time, crypto startups like CoinSwitch are looking to move into traditional finance as the two worlds are set to merge.

But the thing is: The outcome of this excitement will depend on how the government resolves fundamental conflicts arising from the new measures it has reportedly planned to monitor the crypto space.

To begin with, how will capital markets regulator Sebi, which has strong centralised control over stock trading in the country, manage a technology that by default is decentralised? To understand what a future with parallel crypto and stock trading would look like, The CapTable spoke to several industry experts.